Results tagged “BDU” from The Two Solitudes Journal

[Disclosure:  in the early 1980's (sadly, not a typo) I worked in the software industry and was a full-time employee of Bell Canada.  In 1986 I did a short contract once for Rogers inolving their billing systems.  In 2008 I collaborated with TELUS (as an ISP) on a paper concerning network traffic management.  I have never consulted with any of these companies (or any others) in their capacity as a BDU.  Also, directly or indirectly, I own shares in a number of ISPs including those mentioned above.  They also happen to be BDUs, but that's not why I chose to invest in them.]

[This article was also published by Cartt.ca]

I support the Canadian content industries and salute those who have done much with little.  There's much of which to be proud.  Today, though, the Canadian broadcasting system is in crisis.  Mostly, it is caused by a failure to adapt quickly enough to a rapidly changing world.  That's been exacerbated by the current economic situation, too.   But some of it is caused by injurious and spiteful infighting between players in the system that ends up confusing, frustrating and alienating the consumer.

Every player in the system has a role and has responsibilities as defined by the Broadcasting Act.  Beyond that, though, every player also has an unwritten obligation to Canadians.  That obligation is to continually evolve as needed to preserve our Canadian content industries and our creative voice in the world - and to do so collaboratively when necessary.  At the moment, I think all sectors are falling short of this obligation.  We're seldom innovators, we often lag.  It's tough to innovate when you're a small player, as Canada is in this space.  Innovate when possible, follow when practical, but don't follow so far behind that you become irrelevant - and, sadly, that's the dangerous reality we face today.  No one wants to see what we have collapse - but perpetuating a failing system through piece-meal changes isn't going to succeed for long.  The entire system - and everyone in it - needs to change their ways of doing business - and needs to do that now.  Five years from now we won't look back at the great "fee for carriage" or "value for signals" battle of 2009 as the salvation of local TV.  The problem is systemic, regardless of the outcome of this specific battle.  We're far more likely to look back to 2009 and ask ourselves why we didn't do something to really fix the problems while, arguably, we still had a chance.

The Canadian TV industry isn't naturally an economically viable ecosystem where each player can succeed on its own and still fulfill a cultural responsibility.  It never has been and it may never be in the future.  When models break - as they are now - the answer isn't simply to drain money from one sector of the ecosystem and pump it into another.  That's a last-ditch "life support" approach, not one that promotes a sustainable future.  It's a band-aid on a much bigger problem and the answer to such extreme problems always lies in taking radical and decisive action, not applying first-aid to slow the bleeding while hoping that the problem will heal itself.

I certainly don't speak for BDUs but if I did here's what I'd say to conventional broadcasters:

You buy content and sometimes you create it yourself.  You sell advertising that you wrap around that content.  Then you give that away for free over the air (and often on the Internet, too).  You hope that at the end of the day the advertising revenue you receive exceeds the costs of content and distribution - and for the longest time, it did just that, handsomely.

The airwaves are a public good.  In exchange for a right to use a portion of that scarce resource, you must carry some Canadian content.  The CRTC says so.   Fair enough, right?

Lately, though, you like to spend more and more of your money on U.S. content.  If a U.S. broadcaster is airing the same program as you at the same time, I must replace the U.S. signal with your signal so that you preserve the advertising effectiveness of the content in which you've invested.  You benefit greatly from that.  The CRTC says I must do that.  Fair enough.

I spend massive amounts on wire (cable / IPTV) or birds in the sky (satellite) and distribute your signals for free, helping you to reach a larger advertising audience (and therefore allowing you to charge higher advertising rates).  I do that on a localized basis (to the extent that I am able).  You benefit greatly from that.  I must do that.  The CRTC says so.  Fair enough.

As part of the broadcasting system, I must contribute back to the industry.  A percentage of my revenue comes right off the top and goes to the CTF to help create the Canadian programming that you wrap your advertising around.  You benefit greatly from that.  I must do that.  The CRTC says so.  Fair enough.

I also administer and contribute to independent production funds to help you finance content creation through outright grants and/or equity investments.  You benefit greatly from that.  I must do that.  The CRTC says so.  Fair enough.

Local programming is hurting.  You spend so much on foreign content that you can't afford to spend enough on local stations and content.  I now also make contributions to the Local Programming Improvement Fund (LPIF) specifically to help "maintain and improve the quality of local television programming".  You stand to benefit from that.  I must do that.  The CRTC says so.  Fair enough.

So, through the CTF and the independent production funds I make a significant financial contribution to support your operations already - and not just your conventional OTA operations but also your profitable specialty channels, too.  And, through the LPIF I further support your local OTA endeavours.

And let's not forget the taxpayer.  In the case of the CBC, the taxpayer provides direct funding.  And those CTF funds?  They're provided in part by the Department of Canadian Heritage - using taxpayer dollars.  Let's not forget about Telefilm Canada, for that matter.

With respect to your local conventional signals, my value proposition has always been to make those signals available to those who choose not to use an antenna, can't pick up a strong enough signal from an antenna, or for whom an antenna is not an option.  We are part of a unique symbiotic relationship, whether you appreciate it or not.  You create a product and I distribute it for you at no charge to you.  You benefit greatly from this, and so do I, even though it's something I must do.  The CRTC says so.

Apparently that's not enough for you.  Now you want to change the equation.  You want me to pay to distribute your content.  But wait a second.   The Canadian dramatic, comedy and documentary content you carry is paid for in part by me through my CTF contributions.  Don't our independent production funds also make it possible for you to finance many of these projects?  As for local content, isn't that what the LPIF is all about?  Directly or indirectly, the BDUs and the customers of BDUs are already paying to help create the content you use so that you have something to wrap your advertising around.  That begs the question: whose content is it anyway???

Now you want us to pay for that content again when we distribute it on your behalf.  Remember, too, that the consumers who are your customers but not mine - that is, the over-the-air consumers - don't pay anything directly into the system and, other than through general tax coffers, don't fund content creation at all (local or otherwise).  The same goes for those who watch your content free on the Internet.  So the people to whom you give your content for free return little, while those to whom I deliver the content on your behalf indirectly pay much of the freight.  Your business may not be healthy, but it likely wouldn't even exist in today's world without my customers.

You try to sound fair.  You say you'll consider giving up mandatory carriage in return for a negotiated fee for your signals.  That might be fair enough - except that you're also asking that I black out U.S. signals that carry the same content as you if we can't reach a deal.  If I do that, we both lose.  You won't get the distribution I give you and your ad rates will plummet.  I won't be able to offer consumers what they want, and my subscribers will drop like flies (and with that, the funds available through the LPIF, the CTF and the independent production funds upon which you depend will significantly decrease).  Over-the-air signals aren't an option for many (and will be an option for even fewer with the transition to digital OTA guidelines that are now in effect) so if we go down that road we'll be denying many Canadians timely, affordable and legitimate access to content that they want to see.

Your model is broken.  I won't dispute that.  But mine is breaking too.  In ten year's time we will both be largely unrecognizable, if we exist at all.  Today, though, could you survive without me?  I doubt it.  Could I survive without you?  Maybe.  Maybe not.  Is your current proposal apt to accelerate our potential demise without solving any of the underlying problems?  Absolutely.  Can we work together to innovate and find new ways to survive - and perhaps even prosper together as we once did?  I think so.  We both need to innovate, individually and collectively, to survive, not waste valuable time, energy and money fighting each other. 

You're backing me into a corner.   Whether I absorb the new fees you are seeking, or pass them on to the consumer, my business will suffer significant harm.  Worse though, if I don't give in to your demands, the consumers that you and I are both in business to serve will suffer the most.  They're already leaving the system, and your current approach will just drive them out the door more quickly and in even great numbers.

You've done little to adapt to change.  Your record of innovation is abysmal.  Yes, I admit, I could do much better, too, in that regard.  But rather than fix your own problems, or find new ways to operate and engage Canadians, you'd prefer to see my business suffer further damage in order to put a bandage on your gaping - and probably terminal - wounds.   If you don't want to adapt, fine, stick to your crumbling little world.  But don't penalize those who want to change - and that includes many Canadian content producers who want to do more with their content - except that you all too often demand all of the content rights across all platforms and media.  Be part of the solution, not part of the problem.  If you don't want to innovate, don't stop those who do.  Develop reasonable Terms of Trade with the content producers so that they can work with us and others to (re-)engage that audience in new and innovative ways.

The Canadian broadcasting system is an artificially sustained ecosystem that we are all part of.  It's important to Canada and Canadians from an industrial point of view, and it's important to Canada and Canadians from a cultural point of view.  We're all in this together, but "a house divided against itself cannot stand".   Let's fulfil our roles and responsibilities but let's also fulfil our unofficial obligation to Canadians by working together to innovate and prosper in the 21^st century with appropriate new models.  Let's not disregard that obligation by fighting each other as we try to perpetuate out-dated and obsolete ways of doing business.  We do so at the expense of Canadians - and of the future.

In today's Playback Daily (http://www.playbackonline.ca/articles/daily/20080416/tvwars.html; paid subscription required), Etan Vlessing writes that Paul Kemp, president of Stornoway Productions is "keen that Canadians beyond viewers of Stornaway Communications' digital specialty iChannel... see [TV Wars: Media Money and the Battle for Canada's Airwaves,] his behind-the-scenes look at the firece battle for supremeacy betweeen BDUs and broadcasters currently playing out at the CRTC hearings".

To that end, he's offering it "really cheap" to any other broadcaster but doesn't expect that any will take him up on it... underscoring, as Etan Vlessing points out, the problems he's discussing in the documentary.

"It's important to get the message over to Canadians", he says.  Hmmm.... I wonder, Paul, if you've heard of this new thing called the Internet?  If you want to reach the masses with your message about a dysfunctional broadcasting system, why don't you try doing so by distributing your content outside of that troubled system?

"If you want things to stay as they are, things will have to change" -- Giuseppe di Lampedusa

The broadcasters and other participants at the CRTC BDU hearings who are fighting to preserve the status quo had best heed Giuseppe di Lampedusa's words.  And we're not talking little things here.  Major reforms are required to make the system viable -- not just for today but in the future.

The days when TV as we know it will exist as a stand-alone entity are numbered.  Radical changes are required to adapt the medium to be a part of a larger media ecosystem -- the world of Media 3.0.  Let's hope the CRTC looks far enough toward the horizon to see this, even if many of those who are intervening at the on-going hearings aren't.  If the commission and the industry don't adequately prepare for the iminent future, but rather forge ahead with a tweaked version of the status quo beiliving that that will take them where they need to be, they may find, as Gertrude Stein said, that "when you get there, there isn't any there there".

If nothing else, at the very least, the industry and the commission should follow the advice of the inimitable Yogi Beara: "when you come to a fork in the road, take it".

 

 

 

 

 

In his opening remarks for the BDU (Broadcast Distribution Undertaking: i.e. cable, satellite operators,etc.) hearings, CRTC (?) chair Konrad von Finckenstein (?) reiterated the five key issues for this review:

1. What should be the size of the basic package?
2. Should there be guaranteed access for certain Canadian specialty and pay services? Which ones and on what terms?
3. Should there be any type of genre protection for guaranteed services? If so, should they be protected from other Canadian services, or only from foreign services?
4. Should there be a fee-for-carriage for over-the-air broadcasters? If so, how much and on what terms?
5. Should BDUs have access to advertising revenues from on-demand services or from local avails?

 The first four issue all involve tweaking the existing (traditional) system and, while there's much I could say about these issues, they really have little to do with the changing face of television.

It's the last issue -- "Should BDUs have access to advertising revenues from on-demand services or from local avails?" -- that I'll discuss here.

First of all, there really are two issues here: the use of local avails, and advertising within on-demand services (specifically, cable/telco-IPTV VOD services and, perhaps, DTH pseudo-VOD services).  The use of local avails is, like issues 1 through 4, a matter of tweaking the current system and, likewise, is not relevant to the new landscape of TV 3.0.

What is of interest from a TV 3.0 perspective is BDU VOD.   The question framed by the commission, though, is, I think, too limiting.  Whether the BDUs have access to ad revenue for VOD services isn't really the main issue.  It's more fundamental than that -- the CRTC currently restricts advertising on VOD services in such a way that there's little incentive for BDUs or anyone else (networks, content producers or advertisers) to embrace (or invest in) this technology.  And that's a big problem because VOD has the potential to revitalize a flagging technology (traditional TV).  And it's only as an on-demand technology that traditional TV has a future in the world of TV 3.0. 

The question shouldn't be targeted specifically at whether BDUs can monetize VOD offerings via advertising, the question should be whether the commission should relax the rules on VOD advertising that, today, are so restrictive that VOD is going nowhere.

In order to compete with the onslaught of alternative delivery channels for TV content, we need access to robust VOD offerings in Canada.  To me, implementing well-conceived advertising policies that foster the growth of VOD in Canada is the single most important thing the CRTC can do as a result of these hearings -- and failure to do so would be the single most flawed decision they could make.

At the end of the day (or at the end of three weeks of hearings) the future of TV doesn't depend on tweaks here and there that slightly alter the status quo... the future depends on radically altering the TV model such that it can remain competitive with other content delivery options.  ONLY conventional TV operates on a linear programming model.  Every alternative delivery option is primarilly based on on-demand content.

A myopic focus on the status quo (modified or otherwise) that doesn't address the need for a sustainable on-demand element will have viewers changing channels indeed -- and increasingly not coming back.

A print reporter asked me some questions about the upcoming CRTC hearings on BDUs (cable TV, satellite and telco-IPTV providers), leading me to write the following diatribe (I have not proof-read this rant, I must confess).



When it comes to television, the CRTC has a two-fold responsibility: it must ensure that Canadians are well-served both by the provisions of the telecommunications act (distribution) and the broadcasting act (content). Historically, these two were inextricably intertwined, making it easier to define regulatory policies that balanced the disparate interests of the distributors and the broadcasters while simultaneously promoting and protecting Canadian content and culture. Twentieth-century distribution channels had limited capacity and there was clear and reasonable justification for prioritizing and protecting Canadian players and content in that environment. Changes in technology, however, have created a distinct separation between the medium (distribution) and the message (content). Alternative (and unregulated) distribution channels exist today that can offer an infinite range of content, and even within the regulated BDU distribution environment, technology is eliminating the scarcity of spectrum that has been an overwhelming factor in determining what content should be made available. Accordingly, policies based solely on a scarcity that no longer exists need to be reconsidered. However, that being said, we need to transition toward an unregulated (or less regulated) environment gradually lest our entire system crumble as younger viewers increasingly tune out from traditional TV delivery channels.

Sadly, Canadian broadcasters have, on the whole, been very slow to embrace alternative distribution channels -- in large part because they have little incentive to do so in the profitable, protected world in which they live today. The reality is, though, that the audience is on the move, ad dollars will follow, and there's little chance that the CRTC will attempt to regulate content on the Internet. Here, too, the broadcasters are benefiting from an artificially defined eco-system. Geo-blocking is being used by media companies in both Canada and the United States to create artificial boundaries on the Internet. This is done in large part to respect the profitable relationships that exist for conventional TV distribution rights. The result, though, is that American producers aren't reaching as large an audience as they can with their content -- and money is being left on the table. How long they'll continue to tolerate that is anyone's guess but I think it's safe to say that unless the Canadian broadcasters step up to the plate they will be by-passed sooner or later.

The tragic part of the story today is that while some nameless Canadian broadcasters blame their lack of activity in alternative distribution on the challenges of clearing rights for the content, these same broadcasters often demand that Canadian producers give sign away all new media rights to them -- and then proceed to do nothing with them, preventing the producers from benefiting from other opportunities that exist by way of alternative distribution channels.

The best thing the CRTC can do at this critical juncture, where we find ourselves somewhere between a tipping point and a breaking point, is to send a clear message to the industry that while the status quo will be preserved, more or less, for a little while, today's unsustainable protectionist system will be dismantled gradually over the next few years. There's really no choice -- dismantle it gently or watch it come crashing down -- and the sooner the industry realizes that the better it will be for all concerned.


Genre exclusivity (or genre protection): should preserve genre protection only where clearly warranted. That is, where a service exists that is of distinctly Canadian value that could not otherwise survive in the face of foreign competition, genre protection should be provided in the interim -- but those benefiting from it must be made acutely aware of the realities of the future world where we will inevitably move to a world of multiple distribution channels that won't offer the same protection.

As the various distribution channels will increasingly vie for consumer attention, dollars, and advertising revenue, a level playing field is inevitable at some future point. Today, though, while traditional TV distribution remains the dominant format, and continues to garner the lion's share of consumer dollars and ad spending, we're likely to see little emerge in the course of this review that will rock the boat. And that's both good and bad. We'll likely see the commission make efforts to balance the conflicting interests of the various corporate constituents and to, more or less, preserve the status quo for the time being. But that's not going to sustain our artificial ecosystem for long in the face of overwhelming challenges from unregulated content sources. Perpetuating a system that is already highly artificial and increasingly misaligned with emerging consumers does nothing to address chronic problems.

The fee-for-carriage issue? It's a band-aid that won't serve any long-term purpose. If the commission does yield to this recurring demand, it should insist that a large part of the funds received must be spent on the further development of alternative delivery channels. It's not a question of whether these channels will one day dominate, it's merely a question of when will they come to dominate?

Market forces are at odds with CanCon as we know it. In an environment of scarcity (i.e. traditional TV distribution) it's easy to protect and promote Canadian content. However, as we increasingly move to a world where scarcity isn't an issue, opening the traditional TV market too quickly to foreign competition will kill CanCon and do irreparable damage to the domestic production industry. That being said, foreign competition through alternative (and often unregulated) channels is inevitable -- and is already occurring. The sooner Canadian broadcasters ramp up alternative content distribution approaches the stronger their chance of survival. Failure to do so, individually or collectively, will lead to their demise.

Technology is available to shift the balance of power to the BDUs, away from the broadcasters, by way of video on demand (VOD) offerings but current CRTC-imposed constraints on BDU advertising are inhibiting the deployment of significant VOD offerings. For now, this protects the broadcasters, but we have to question whether it's right to put the broadcasters ahead of the consumer -- and that's what we're doing today.

This week saw the introduction of a limited HBO -branded service on Bell Mobility -- and that's just the tip of the iceberg. The commission will spend the next three weeks grappling with its role in the conflicting world of TV 2.0... but TV 3.0 is on the horizon already and that will change everything.

The Canadian media industry can have a strong a prosperous presence in the future, but we must start taking steps today to adapt to the change that is all around us and we can't depend on twentieth-century approaches to preserve an artificial and unsustainable ecosystem that isn't viable in the twenty-first century world.